Share PriceThe recent sell-off may have been inspired in part by the tightening of the corporate bond market, a casualty of the sub-prime lending fiasco. The market may believe that FO will have difficulty financing, or may not be able to finance, development of its field.
Also, as far as I know FO hasn't completed its arrangements for a $250 million dollar revolving credit facility with Macquarie bank. It had signed a non-binding letter of intent in February 2006. However, it may be that the bank has decided to pass given the current credit market aversion to securitization and the cost of risk premiums. Or, at least, the market may be betting that it will.
By the way, the bank had negotiated the right to purchase as many as 60,000,000 warrants for FO shares if the full amount of the credit facility were withdrawn. The warrants would be priced at a premium of 25% over the 30-day average price of the stock just prior to closing of the financing. So, lower SP would be better for the bank if it did decide to go ahead.
Food for thought. Comments anyone?